Buying a house can be the most serious financial decision most people may ever consider. Whether it's a primary residence, a seasonal vacation property or one of many rentals, purchasing real property is a complex financial transaction that requires multiple people working in concert to see it through.
Most of the people involved are quite familiar. The most known face in the transaction is the real estate agent. Then, the mortgage company provides the money necessary to bankroll the deal. And ensuring all areas of the sale are completed and that the title is clear to pass from the seller to the buyer is the title company.
So, what party is responsible for making sure the real estate is worth the amount being paid? In comes the appraiser. We provide an unbiased opinion of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from A. M. Appraisals will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
To ascertain the true status of the property, it's our responsibility to first perform a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are present and are in the condition a typical buyer would expect them to be. To ensure the stated square footage is accurate and describe the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the property.
Next, after the inspection, we use two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
Here, the appraiser pulls information on local construction costs, the cost of labor and other elements to calculate how much it would cost to construct a property similar to the one being appraised. This estimate often sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Analyzing Comparable Sales
Appraisers can tell you a lot about the communities in which they appraise. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with the features of subject.
A true estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At A. M. Appraisals, we are experts when it comes to knowing the worth of real estate features in West Columbia and Lexington County neighborhoods. The sales comparison approach to value is typically given the most weight when an appraisal is for a home exchange.
Valuation Using the Income Approach
A third way of valuing approach to value is sometimes used when an area has a reasonable number of rental properties. In this situation, the amount of income the property yields is factored in with other rents in the area for comparable properties to give an indicator of the current value.
Arriving at a Value Conclusion
Combining information from all approaches, the appraiser is then ready to document an estimated market value for the property in question. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property is worth. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price up or down. But the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from A. M. Appraisals will help you attain the most fair and balanced property value, so you can make wise real estate decisions.
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